According to the South China Morning Post report on October 14th, the leaders of the 27 member states of the European Union will demand that EU institutions urgently develop new trade countermeasures at a meeting in Brussels, Belgium, on Thursday. This is in response to the imbalance issues they believe are caused by China's economic policies.
This directive is part of a draft statement that is being discussed before this week’s European Council summit. Previously, the EU and China reached an unexpected agreement last week in Beijing, restricting the number of hybrid vehicles that China exports to the EU to 350,000 units per year.
Although this agreement alleviates the imminent threat of a trade war, officials and diplomats in Brussels made it clear on Wednesday that this is not enough. The EU intends to continue pressuring China to restrict exports in other industries.
A senior diplomat who requested anonymity said, “It may not have been a complete success, but this is our first achievement, and it marks the beginning of pushing China to restrict exports.”
Since the EU wants to avoid direct conflicts with the world’s second-largest economy, the draft statement does not explicitly mention China, but uses terms often used by the EU to describe China’s strong industrial power that allegedly damages the European economy.
The draft statement reads: "The European Council has examined the issue of global macroeconomic imbalances and has called for the European Commission to continue conducting results-oriented dialogue, effectively utilize existing EU tools, and urgently expand the EU's policy toolbox by adding new tools to better address these imbalances." This statement may still be amended before the summit on Thursday.
EU leaders will discuss these imbalances during lunch, and it is expected that they will request the European Commission to develop new policy tools by the end of this year. The European Commission is responsible for managing the trade policies of the 27 member states and leads trade negotiations with China.
Two of these tools have been announced: one is a tool designed to encourage companies to diversify their supply chain sources; the other is a “solidarity mechanism” aimed at compensating companies that have suffered losses due to Chinese countermeasures.
However, diplomatic sources predict that many EU leaders will support the ‘emergency exclusion mechanism’ proposed by France and Germany. According to this scheme, if certain countries or companies engage in coercive actions, the EU can quickly exclude them from the EU market.
Although there were speculations that the unexpected agreement on hybrid cars last week might weaken the willingness of EU member states to take further action, sources who spoke with this reporter assured that this is not the case.
Several sources said that this agreement demonstrates the effectiveness of the ‘dual-track’ model, where one side engages in dialogue with China while behind the scenes developing new trade countermeasures. Several sources indicated that Germany’s shift to supporting tough measures could be a key factor in changing the situation.
Another diplomat stated: “We may be more optimistic than initially anticipated now. These two aspects complement each other. In order to conduct credible dialogues, we must allow the outside world to see that we possess necessary policy instruments capable of taking action when needed.”
German Chancellor Friedrich Merz said to reporters on Wednesday: "When other countries damage our economy through high subsidies, artificially low exchange rates, overcapacity, and aggressive pricing, we will no longer stand by and do nothing."
According to Bloomberg, Mertz said: "Anyone who tries to provoke us in terms of trade conflicts will find that we are now ready to counter such actions and will take appropriate measures."
Fudan University's Director of the Center for European Studies and Professor Jean Monnet at the EU Chair, Ding Chun, told Observer Network that this consultation between China and Europe not only expressed a willingness to respect each other's concerns and seriously address differences at a macro level, but also achieved some concrete results.
Professor Ding Chun does not agree with the statement that 'China made more concessions'. He pointed out that overall, the outcome of this negotiation was one of mutual compromises, including solutions to disputes regarding hybrid and electric vehicles.
At least, we can say that it has set a good precedent. Ting Chün believes this negotiation has formed a positive precedent: both sides clearly expressed their intention to avoid direct confrontation and trade war, and obtained numerous concrete results, not merely remaining at the level of principled statements or verbal games.
However, Ding Chun also emphasized that it is still too early to consider this as a “turning point” in the improvement of China-EU economic and trade relations. The key lies in the subsequent implementation.
